Paradise postponed

20 September 2012 By Martin Hutchinson

The richest Yugoslav republic at independence has been slow to reform its economy. Now Slovenia’s budget and pension systems are out of whack and the state-owned banks are full of bad debts. With or without an EU bailout, it must complete the work postponed for two decades.

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The yield on Slovenian 10-year government bonds has risen from 5.2 percent in March to 6.3 percent on Sept. 20. The yield peaked at 7.6 percent on Aug. 13. Finance Minister Janez Sustersic said last week that the government will have to support its banks with state guarantees of up to 4 billion euros, or about 11 percent of 2011 GDP.
Slovenia’s GDP declined by 7.8 percent in 2009, then grew by 1.2 percent in 2010 and 0.6 percent in 2011; in the second quarter of 2012 GDP was down by 1.0 percent on the previous quarter and 3.2 percent on the corresponding quarter of 2011. Its current account deficit peaked at 9 percent of GDP in 2008, but swung to a small surplus in 2011 and the first half of 2012.
According to the Statistics Office of Slovenia, the public deficit was 6.4 percent of GDP in 2011 and public debt was 47.6 percent of GDP; however, the Slovenian newspaper Finance in 2011 calculated debt at 63 percent of GDP.
A reform to raise the retirement age to 65 from its current level of 57-63 depending on years of service was rejected by 72 percent of the population in June, 2011.
“We do not reject (pension and labour) reform solutions presented so far … and we hope negotiations on its contents which are ongoing will succeed”, opposition party Positive Slovenia said on Sept. 19 in a statement prepared for Reuters.

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